Magazine “Expert” – a shot glass against a jug/an interview of A. Mordovin (2015-08-20)

Russian people began drinking vodka less than beer.

The Russians are not the most alcohol-intensive nation in the world. Moreover, vodka stopped to be the most popular alcohol drink in the country. Now, Russians prefer beer and they drink it no less than in Europe.

Russia is losing old-fashioned traditions “to sling a pot” and even the last economic recession didn’t convey a suggestion to “drown grief in wine”. This is proved by legal producers, alcohol sellers as well as narcologists and experts, explaining this fact by life quality improvement, car popularity and consumers’ preferences.

Скриншот 24.08.2015 150327.bmp

But Russia remains a mysterious country.  Results of social researches, information from producers, sellers and experts are “painting various pictures”.    

 Скриншот 24.08.2015 150532.bmp

According to the data of the Ministry of Health and the Federal State Statistics Service from 2003 to 2013, a number of people applying to the hospital to get rid of “the demon drink” reduced twice – from 228 thousand to 112.

According to the data of the Public Opinion Foundation 2014, every fifth respondent (21%) stated that he never drank alcohol, 10% threw with drinking because of health diseases, age and habits). In 1998 the total number of abstainers was only 2% down.

Moreover, in 2014, 31% of respondents preferred vodka, 30% – wine, 13% (the fourth place) – whisky, rum, cognac. In 2002, 40% of respondents used beer, 38% – vodka, 31% – wine, 11% – home brew, 10% – liqueur and home made wine.

But the Federal Statistics Service showed that in 1999 Russian citizens used much vodka, in average 15,2 l. per capita, but in 2014 sales dropped twice – to 8,7 l. As for wine, in 1998 – 3,5 l/ per capita, in 2010 – 7,2 l.; last year this figure dropped again – 5,8 l. As for cognac, the figure increased threefold – 0,8 l. per capita in 2014 against 0,3 l. in 1998.

Beer cut a record. From 1998 to 2014 sales grew from 27 to 69, 6 l. per capita, the highest figure was in 2007 – 80,9 l.   

In the Soviet times, people used 23 – 24 litres of beer and as for fruit wine and champagne – over 25 l. per capita.

Moreover, an economic crisis influenced only on imported drinks – import volumes decreased to 40% and prices increased to 40 – 50% correspondingly. Whisky, gin and tequila dropped twice. So, Russian people began to get used to Russian products.

All experts note that a share of vodka is declining. By the statement of Dmitry Dobrov, the Chairman of Board of the Alcohol Producers’ Union, thirty years ago we had vodka, two or three beer brands, Caucasus and Moldavia wine, Armenian cognac and that is all. But the situation has changed due to the market characteristics and alternation of generation.

Скриншот 24.08.2015 150551.bmp

However, official data, concerning vodka production stretch the reality. According to Dobrov’s estimates, the share of counterfeit is 50% of strong alcohol market and by Drobiz’s opinion it is even 65%. Besides, authorities also confirm this fact: currently the Head of the Federation Council Valentina Matvienko stated that illegal vodka production reached 60% and the budget lost near 290 billion rub. per year.

By opinion of Vadim Drobiz, the Head of the Regional and Federal Alcohol Markets Studies Center, Russia is a beer country: 70 l. per capita is a great figure even in comparison with European data. The Russians use 10 billion litres of beer/year and 1,25 billion litres of vodka.  

Experts are of the same mind that it happened as a result of price jump in 2012 (Government policy, under the pretext of the struggle with alcohol abuse) followed by increase of excise taxes. Dobrov believes that the share of illegal vodka was minimal at that time – 20 – 25%. But since then, retail prices for legal vodka increased two and a half times. An excise tax in the amount of 100 rub. is paid for every 0,5 l. bottle, plus 25 -30 rub. of VAT. So, a tax component is min. 135 rub. As a result, legal sales dropped greatly – annually to 15 – 20%.

In Drobiz’s view, any civilized country has legal quality alcohol production for all social groups, including the poor. Everybody understands that it is more difficult and more expensive to fight against illegal production of alcohol than to produce high quality goods. In Brazil that is much poorer than Russia, 65% of cars are loaded with spirit. But no one Brazilian rough sleeper drains it from a petrol tank at nights. In Russia the cost of all strong alcohol is five – seven times as much as average wages. As a result there is counterfeit.  

We observe a similar situation in the brewing industry. So, according to the data from Russian Brewers’ Union, uniting 76 companies with 80% of the market share, in 2008 – 2014 beer production in the country dropped to 30%, for the first quarter – to 9%. Besides, according to the estimates of Barley, Malt, Hops & Beer Union, beer production didn’t fall; it was 10 billion litres, even more it increased to 5% for the first quarter of the year.

By opinion of Alexander Mordovin, the President of the Union, statistics data dropped due to officially declared volumes from which an excise tax was paid. No one small (craft) brewing company pays excise taxes. It is due to absence of responsibility for tax non-payment. The only penalty is an additional payment for law breach. Craft brewers explain their behavior that they pay taxes for the restaurant business. And since 2009, an excise rate increased fivefold – 18 rub./l. and in 2017 it will be even 21 rub. 

Russian Government began applying tough sanctions even in 2008, prohibiting beer advertising and street sales. But soon, local brewers had luck because the Government had to get permission (but only till 2019) to advertise and sell beer in stadiums thanks to holding of Football Championship 2018.

But the brewing industry was overregulated, so victims were inevitable. By opinion of Russian Brewers’ Union, from 2008 to May of 2015, 12 largest brewing plants stopped operating in Moscow, Saint-Petersburg, Kursk, Rostov-on-Don, Chelyabinsk and Krasnoyarsk.

It bears noting that the President of Barley, Malt, Hops & Beer Union Alexander Mordovin gives more positive estimates. By his viewpoint, large companies are closing, their share is reducing but sales volumes of independent breweries are increasing. If five years ago the share of transnational companies was 93% of the total beer production in the country, now it is 75%. The key driver for the development of the independent brewing business is ad prohibition: small companies have no huge sums for ad budgets like large companies that spent 5,5 billion rub. in 2011.  

According to experts’ opinion, advertising gives a consumer a chance to choose a preferable product. A. Mordovin noted that it is true for milk but it is not applicable to alcohol and tobacco.

All advertisements are branding, they have an impact on us and we imagine that we’ll become tough guys if we buy this product. Large companies lost an opportunity to influence on consumer’s choice due to ad prohibition but small companies got a chance. They have high expenses but due to a heavy selling price, costs are recovered.

By Leonid Popovich’s view, the President of Viticulturists and Winemakers Union, this may sound strange but Russian wine makers gained by economic recession and a ruble slump. The share of foreign wine reduced by one third for the first quarter of 2015 – to 49,4 million litres. So, according to the State Statistics Service, local wine production was 120% compared with a year earlier – 2,8 dL.    

But, approximately a half of this increase fell on integration of the Crimea having many wine farms. “The Crimea story” took an important effect. The Government paid attention to the wine industry. In December 2014, the Bill “On State Regulation and Circulation of Alcohol”, causing a lot of difficulties to wine makers, has been amended. By Popovich’s words, small companies couldn’t fulfill requirements of this Bill physically. For example, a duty for production and sale license was 800 thousand rub. As a result, in 2008 there were 270 large and medium wine companies and last year without the Crimea – only 70 (110 – with the Crimea). 

The Government policy was focused on reducing of small and medium companies, so it was easy for public authorities to control large companies. According to the new Bill, relations of the regulator and producer are legislated distinctly, structuring wine according to quality characteristics. It is offered to reduce an excise tax twice for two new domestic wine categories, protected by geographical indications as well as wines protected by a location name. Besides, Winemakers’ Union is negotiating with the Ministry of Finance concerning cut of license cost from 800 thousand rubles to 65 thousand.

It bears noting that Crimea wines got under foreign sanctions that limited export possibilities. And Crimean people are trying to impose tit-for-tat sanctions for wine import. But they have not been understood by the Government yet.

1 comment

  1. Политолог says:

    Эта же статья журнала “Эксперт” размещена на сайте компании profibeer. Только там всё, что сказал Президент Вашего Союза Мордовин аккуратно вырезано из оригинального текста, который был напечатан в журнале.

    Имейте в виду.